The Queen capped her Diamond Jubilee year by becoming the first monarch to attend the Cabinet in more than two centuries.
Surrounded by her ministers she observed part of the weekly meeting after being welcomed to Number 10 by Prime Minister David Cameron.
Topics discussed around the famous table included Afghanistan and the economy.
But the Queen did speak twice - to wish everyone a happy Christmas and to humorously suggest the next Queen's Speech should be on the shorter side.
Communities Secretary Eric Pickles said: "The Queen seemed very relaxed, in a very good mood and took an enormous interest in the Cabinet discussion."
He told BBC Radio 4's The World At One: "I think people were perhaps more considered in what they say, but nevertheless it was a proper discussion on the general economic situation and the inflation figures and Afghanistan."
At the start of the meeting Mr Cameron congratulated the Queen on her "fantastic" Diamond Jubilee year and said the last monarch to visit the Cabinet was believed to have been George III in 1781.
The Queen's father George VI had met with the Cabinet during the Second World War, he said, but added: "We think the last time a monarch came to the Cabinet was in 1781, during the American War of Independence.
"But I'm happy to report that relations have improved slightly since then."
After his initial remarks, the Prime Minister said they would get on with a "proper Cabinet agenda" starting with an update on parliamentary business by the Chief Whip, Sir George Young.
The Queen, who stayed for around 25 minutes of the 90 minute meeting, was given a gift by the Cabinet - 60 bespoke, hand-finished table mats with images of her official London home Buckingham Palace.
It also made a donation to the Queen Elizabeth Diamond Jubilee Trust, set up as part of the celebrations to mark her 60-year reign.
And the Foreign Office announced a large area of British Antarctica - almost twice the size of the UK - had been named Queen Elizabeth Land.
During the Queen's Downing Street visit the Cabinet posed with the monarch for a group photograph and as ministers laughed at an apparent joke she remained composed staring into the camera.
The Prime Minister's spokesman said: "The Queen was an observer at Cabinet. She did speak on two occasions, the first of which was near the end of discussion on parliamentary business, where, I think it's fair to say, very gently and very humorously, on the section regarding the next Queen's Speech encouraged it to be on the shorter rather than the longer side.
"And then on leaving Cabinet at around 10.45 she wished them all a very happy Christmas."
Leader of the Commons Andrew Lansley was the only cabinet member not to attend as he had been "unavoidably delayed," added the spokesman.
During the The World At One interview Mr Pickles dismissed suggestions that the Queen was crossing a constitutional line by attending the Cabinet.
He said: "We are her Cabinet, we operate for her. She was sat in the seat where the Prime Minister traditionally sits and, given it's her Cabinet, she can come any time she wants."